Interest rates will be low for (practically) forever. On Aug. 27, the Federal Reserve announced the conclusion of its highly anticipated multiyear framework review. The big reveal? We can expect short-term interest rates to remain at or near zero for years to come. For investors, the prospect of an investment landscape where income is scarce has become a reality that will need to be addressed — not only in the current economic crisis, but long after.
The Fed made a small change with big implications. Policymakers shifted from targeting inflation at 2 percent to now targeting “inflation that averages 2 percent over time.” In other words, periods where inflation is above 2 percent will now be entirely consistent with this new definition of long-run price stability. The announcement was broadly in line with what the Fed had signaled to markets and had been largely priced in. The Treasury market saw the biggest reaction, as the 10-year yield rose 8 basis points to finish Th
